The sale of the Tazo Tea brand to Unilever plc (ADR) will include all of its recipes, inventory and intellectual property that now belongs to Starbucks Corporation. The brand, which is sold mainly in conventional grocery and convenience retail channels, produces a range of tea products, including packaged tea, K-Cup pods and bottled ready-to-drink (RTD) beverages.
For Starbuck's, which acquired Tazo in 1999 for $8.1 million, the deal is a lucrative one which offers a more than 47-times return on its investment.
"With its strong appeal to millennials, TAZO® is a ideal strategic fit for our USA portfolio", Kees Kruythoff, President of Unilever North America, said in a statement.
"With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever".
Starbucks posted total revenue in the quarter, ended October 1, of $5.7 billion, flat with the year-ago period.
The coffee giant cut back its profit forecast on the heels of disappointing fourth quarter sales, which were impacted in part by two back-to-back hurricanes. With JPMorgan Chase & Co., the company is also developing credit and debit cards that have rewards built in. The chain said fourth-quarter sales rose 2 percent at its established locations worldwide, below the 3.3 percent Wall Street analysts expected, according to FactSet. Stripping out the impact of Hurricanes Harvey and Irma, which struck the U.S.in September, comparable sales would have been up 3 percent. On Thursday, the company posted earnings per share of 54 cents for the quarter, in line with analysts' expectations.
Global same-store sales increased 2%, fueled by a 2% increase gain in the average ticket and a 1% increase in the number of transactions. But its same-store sales came lower than expected and, in the United States, fell far short of its historic 5% growth rate. The tea category in Starbucks stores continues to grow double-digits globally, with Starbucks well on its way to building the Teavana business to over $3B over the next five years. Its earnings were 55 cents per share, on the nose with analyst projections.